In October, we wrote about the Supreme Court case S. Franses Ltd v The Cavendish Hotel (London) Limited  UKSC 62, concerning a landlord’s ability to oppose a lease renewal under the Landlord and Tenant Act 1954 (the “Act”) using ground (f) (redevelopment). Yesterday, the Supreme Court handed down judgment in favour of the appellant tenant. On face-value, the implications of this case seem to be tenant-friendly; however, here we discuss further the commercial implications of the ruling for both landlords and tenants. Continue reading
Tag: supreme court
Today the Supreme Court will hear the case of S. Franses Ltd v The Cavendish Hotel (London) Limited, a case which property litigators have been following closely since last year. The case concerns a landlord’s ability to oppose a lease renewal under the Landlord and Tenant Act 1954 (the “Act”) using ground (f) (redevelopment). If the tenant is successful in today’s hearing, the evidential burden on landlords contemplating redevelopment could increase dramatically. Continue reading
In a 4-1 ruling, the Supreme Court has found in favour of HMRC in the long-running saga of Project Blue Limited v. HMRC (2018) UKSC 30, to the effect that the taxpayer was liable to pay stamp duty land tax (SDLT) on the amount of financing (£1.25bn) it received under the sharia’h law compliant structure, and not merely on the actual price it paid for the land (£959m).
To recap briefly, the taxpayer had contracted to buy a freehold property at Chelsea Barracks in London from the Secretary of State for Defence for a basic price of £959m and had arranged to finance this, along with anticipated development costs, by using a sharia’h law structure under which it sub-sold the freehold on to a banking group for £1.25bn and immediately leased back the asset on terms that effectively replicated a normal financing arrangement, at the same time taking a right to buy back the freehold in the future once the financing arrangement had run its course.
Not many outside the business rates bubble will have been following the twists and turns of the Mazars case and its aftermath. Stripping away the jargon, the Supreme Court decided that each floor in a multi-occupied building should be subject to a separate rates bill even where immediately above or below another floor occupied by the same entity, unless linked by a private staircase or lift. This is of relevance because especially large floors enjoy a discount, which only applies if all floors occupied by the entity in the building are taken into account.
The Government surprised the rating world by announcing in the Autumn 2017 Budget that legislation would be introduced to restore the practice of the Valuation Office (responsible for setting the rateable values of commercial properties) prior to the Supreme Court decision.
After a consultation process the draft bill has now been published. In short, once it becomes law (intended to be before the end of the current session of Parliament) floors will be treated as one provided they are occupied (or, if vacant, were last occupied) by the same entity and are “contiguous”. Contiguous means they either touch or are separated only by a void (e.g. a raised floor accommodating landlord’s services).
It is good practice for a local planning authority to give reasons for the grant of planning permission. Failure to give adequate reasons may be serious enough to justify quashing the permission.
There is a statutory duty to give reasons for the grant of permission for EIA development. However, even if it is not EIA development, reasons will need to be given where the grant of permission does not follow the planning officer’s recommendation; where the development would not comply with planning policy; and where there is significant public interest in the proposals. The law on the duty to give reasons was summarised and confirmed recently in a Supreme Court case, Dover District Council v CPRE Kent (2017) UKSC 79.
The Dover case related to a planning application for a large residential development in an area of outstanding natural beauty (AONB). Before the local authority granted permission, the planning officer’s report had made several recommendations, including reducing the number of residential units, to reduce the harm caused to the AONB. The report stated that this would preserve scheme viability and retain the economic benefits of the development, which helped to provide the finely balanced exceptional justification needed for causing harm to the AONB. The officer’s report also recommended implementation as a ‘single comprehensive scheme’ to secure those economic benefits (including a hotel and conference centre) and conditions or planning obligations to achieve this.
Planning permission was granted by the local authority without following these recommendations. No reasons were given by the local authority for this departure from the officer’s report.
The Supreme Court judgement in the case of Tiuta International v De Villiers Surveyors was handed down at the end of last month. The case involves surveyors valuing a property development, and a lender granting a loan facility to a developer while relying on the valuation.
The Supreme Court held that where a lender, Tiuta, advanced money on the basis of an initial valuation of property by surveyors De Villiers, then Tiuta refinanced the facility on the basis of a second negligent valuation by De Villiers, the liability of De Villiers was limited to the ‘top up’ element of any additional lending.
This ruling has come at a time when valuation negligence is a hot topic in the courts. There is an increased frequency of claims, often being tied to the financial instability of the late 2000s and its effect on commercial real estate values. In recent months, other important issues such as the width of the margin for error in valuation, have come under scrutiny.
For more information on this case please click on the link to the HSF insurance blog post, below:
The Supreme Court unanimously rules that, in the absence of express wording in the lease, Marks and Spencer is not entitled to an apportioned refund of rent and other charges after it had exercised a break clause in its lease
The Supreme Court has today (2 December 2015) handed down its long-awaited judgment in the showdown between Marks & Spencer (M&S) and its former landlord of head office premises in Paddington. The question was whether, absent express wording, M&S could claw back around £1.1m in apportioned rent and other charges, after it had exercised a break clause in its lease which took effect part-way through a rent quarter.
The Supreme Court has now definitively confirmed, much to the relief of landlords across the country, that particularly where the parties have entered into a full and professionally drafted lease, it would be wrong for the Court to attribute to a landlord and a tenant an intention that the tenant should receive an apportioned part of the rent payable and paid in advance.
The Supreme Court has ruled that tenants will not necessarily be saved from bad bargains even if service charge provisions require them to pay sums well in excess of the landlord's actual costs.
Arnold v Britton and others  UKSC 36 concerned the interpretation of service charge payment clauses in 25 long leases of holiday chalets in a leisure park. The clauses varied slightly, but all required the tenant to pay a fixed annual sum for services, rather than the cost of those services, as might be more common in a commercial lease. The problem didn't lie in the payment of the original fixed sum of £90 per annum, more that this would increase at a compound rate of 10% every year after the first year of the 99 year term, or for some leases, every three years. Applying that interest calculation, the annual service charge payable by some tenants in 2015 was £2,500. By term end in 2072, the annual amount due for very modest services, where the chalets could only be used for six months of the year, would be an enormous £550,000.
By a four to one majority, the Supreme Court refused to rewrite the bargain that the parties had entered into when they signed up to the leases between the 1970s and 1990s. Whilst recognising that the consequences of the clauses which at first sight seem fairly innocuous could be catastrophic for the tenants, the Court ruled that the clauses were clear and unambiguous enough so that their natural meaning was not in doubt. The Court's role was to interpret the contract, and not to correct it. The leases were granted at a time of significant and spiralling inflation. In that context, an objective reading of the lease showed that the parties had chosen a fixed sum with fixed annual increases. It was inferred that the tenants would have known on the first day of the lease term what the payments would be going forward, and indeed, benefited from that low rate in the early years of the term. Equally, the Court concluded that the landlord had accepted the risk that, should inflation continue at the prevailing rates, he may not recover the full amount that he might spend in providing the services he was obliged to.
The case shows how difficult it is to unravel any contract once it has been entered into. These tenants, and those in a similar position, will be bound by their leases, unless they can agree a surrender or variation with their landlords, both of which can only be negotiated with the landlord's agreement. Landlords will obviously be in the strongest negotiating position. Parties who find themselves in similar situations could consider whether the document reflects their intention at the time of entering into the contract, and, if not, whether a claim of rectification could be brought. They might also consider whether any misrepresentations were made by the other party to the contract which they relied on when entering into the contract. This might give rise to a claim in estoppel or for misrepresentation. Finally, parties to contracts where there are unexpected consequences could also consider whether they were properly advised by their legal or other representatives of their potential liabilities when they entered into the relevant contract, and whether there is any potentiality for a claim in professional negligence.
For more information please contact Matthew Bonye or Rhian Arrenberg at Herbert Smith Freehills.